When I lived in NYC, a local coffee-place-slash-home-design-store offered a subscription, whereby if you used it almost every day, you'd be getting significant discount on your artisanal latte. I think they went on to try and create some kind of loyalty rewards app, but for a while, this concept was real. https://www.10best.com/destinations/new-york/new-york/articl...
The cup-of-coffee pricing fallacy
21–30 of 102 posts
Re: The cup-of-coffee pricing fallacy
#22The problem with "cup-of-coffee pricing" is that if I trust everybody that has a subscription to sell to me, at the end of the month I will be broke. Too much subscriptions is death by a thousand cuts.
Exactly. People who want a service for $5.00/mo aren't viable customers for SaaS
Re: The cup-of-coffee pricing fallacy
#23I found it hilarious when a LA based startup compared their pricing structure to a 'nice meal' (50-100$) Not only did it insult my definition of a 'nice meal', but also made me not want to give them any more money for 'nice meals'. A nice meal is 700 calories from healthy sources. An extravagant meal is the price they quote. Similarly $5 is not the price of a coffee... It's about 30p.
That's exactly why targeting people to pay $5.00/mo for software as a service is a mistake. At that tier SaaS gets people who complain about $5.00 cup of coffee.
Re: The cup-of-coffee pricing fallacy
#24The "cup of coffee" analogy always struck me as though it was asking, "Hey, wouldn't you be willing to pay twice as much for your coffee as you do now?" And, well, no. It also misses the mark for anyone who says, "I'm not paying $100 a month for coffee, that's rediculous, I'll make my own. Now for those who actually do buy their coffee daily, it still assumes Also,it still asdumes a sort of laziness in personal budge…
Most of small SaaS is an equivalent of a luxury service.
Re: The cup-of-coffee pricing fallacy
#25On the other hand, most SaaS founders, especially in B2B, are inclined to charge too little for their service. So the coffee analogy can wake you up that $5/mo or $10/mo is an almost ridiculously low price for a piece of software that solves any sort of problem. It's worth pondering why SaaS founders are so inclined toward underpricing. I think this is because SaaS founders, especially if they are developers, tend to…
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Re: The cup-of-coffee pricing fallacy
#26I'm the person who has been quoted. The person whom I addressed that was going to run a business selling access to a commenting feature . https://news.ycombinator.com/item?id=22209411 The competition for that feature is free comments via Facebook so anyone who does not want to spend money has that ability. The other set of "competitors" is accessed for free via open source software that one can install. As soon as th…
I fully agree with the notion (go for a more premium market - even though I'm sure you could have a long discussion what's the right market and price point here, e.g. $100 seems a bit much for a lot of the "professional blogger" market), but I'm not sure framing a business expense in terms of daily coffee is a good comparison to communicate its value.
Are your customers likely to be the kind of people that go out multiple times a month in expensive cities?
Some of your customers are small outfits (single person, or side-project of multiple people), a group of people where I'd expect "daily expensive coffee" is seen as more frivolous then spending the same on a sensible business expense.
And larger businesses don't think in those terms at all when budgeting, but much more in risk, saved employee hours, saved money spent on contractors handling the same thing, ... The "nice meal" analogy might work slightly better here, but also always has the risk of seeming out of touch for people from other regions.
Re: The cup-of-coffee pricing fallacy
#27Re: The cup-of-coffee pricing fallacy
#28I've always hated it because it makes the assumption that everyone is at the same position in the class hierarchy - I'm poor, the last time I drank a coffee shop coffee was something like 8 years ago and even then it was bought for me by my psychologist, your 'cup of coffee a day' price just sounds extravagant to me.
You are unlikely to be a customer of a paid-for commenting service as the alternative is free. PS. I don't get the downvotes. Someone who says they won't spend $5 on a coffee because they are poor would be willing to pay for commenting feature on their website?! Something that they could get for free ?
> Please don't comment about the voting on comments. It never does any good, and it makes boring reading.
Re: The cup-of-coffee pricing fallacy
#29I hated this assumption too, but for different reasons.
First, the price for a plain old cup of coffee at Starbucks differs from region to region, but it usually normalizes at around $1.80 (taxes included). Refills are $0.52. While, yes, Starbucks’s coffee-based offerings (like lattes) are more expensive, coffee from Starbucks is quite cheap and VERY consistent (and cheaper than at a mom and pop coffee shop).
Second, there is more value from that cup of Starbucks coffee than the coffee itself: the space, the music, the Wi-Fi, etc. Products that make this comparison usually don’t offer the same value proposition.
Re: The cup-of-coffee pricing fallacy
#30There is little need for opinions here - just A/B test and see what works better.
It’s hard to test in some cases when there’s high variance, and customers seeing regular price changes comes with its own downsides.
This isn’t A/B testing a price change, it’s just an associated message about N cups of coffee.